Business

Tobacco Bonds May Be Dangerous to Your State’s Financial Health

Tobacco Bonds May Be Dangerous to Your State’s Financial Health

After a bruising legal fight, tobacco companies agreed in 1998 to compensate 46 states, the District of Columbia and five U.S. territories for the health-related costs of smoking. Wall Street helped turn their annual payments into upfront cash by selling bonds to investors. Some of the deals included a form of high-risk debt, capital appreciation bonds, which obligated governments to pay out billions of their tobacco income in the future. Related: How Wall Street Tobacco Deals Left States With Billions in Toxic Debt

Tobacco Bonds

State Settlement Money Received in 2014
(millions)
Portion of Settlement Receipts Pledged to Repay Bonds Proceeds from Selling Tobacco Bonds That Are Still Outstanding
(millions)
Capital Appreciation Bonds,
Amount Sold
(millions)
Capital Appreciation Bonds,
Amount Owed
(millions)
Smoking Prevention Spending as Percentage of Settlement Receipts
(FY 2014)
Alabama $92.7 Set at $13 million/year $92.8

N/A

N/A

0.3%
Alaska $32.3 80% $412.0 $12.1 $137.3 31.3%
American Samoa $2.1

N/A

N/A

N/A

N/A

N/A

Arizona $100.5

N/A

N/A

N/A

N/A

18.5%
Arkansas $50.0 Set at $5 million/year $96.8

N/A

N/A

35.0%
California * $726.6 100% $7,962.5 $350.5 $3,665.0 8.9%
Colorado $100.4

N/A

N/A

N/A

N/A

25.9%
Connecticut $96.0

N/A

N/A

N/A

N/A

3.1%
Delaware $29.5

N/A

N/A

N/A

N/A

28.1%
District of Columbia $38.0 100% $769.4 $248.3 $4,424.3 1.3%
Florida

N/A

N/A

N/A

N/A

N/A

N/A

Georgia $139.3

N/A

N/A

N/A

N/A

1.6%
Guam $2.5 100% $37.0 $3.4 $115.5

N/A

Hawaii $52.7

N/A

N/A

N/A

N/A

15.0%
Idaho $27.5

N/A

N/A

N/A

N/A

8.0%
Illinois $306.9 100% $1,503.5

N/A

N/A

3.6%
Indiana $67.4

N/A

N/A

N/A

N/A

8.6%
Iowa $71.6 78% $832.0 $37.0 $551.8 7.1%
Kansas $62.2

N/A

N/A

N/A

N/A

1.4%
Kentucky $48.3

N/A

N/A

N/A

N/A

4.3%
Louisiana $139.9 60% $659.7

N/A

N/A

5.7%
Maine $56.4

N/A

N/A

N/A

N/A

14.4%
Maryland $76.9

N/A

N/A

N/A

N/A

11.0%
Massachusetts $282.1

N/A

N/A

N/A

N/A

1.4%
Michigan $253.2 24% $1,215.9 $185.2 $7,691.8 0.6%
Minnesota

N/A

N/A

N/A

N/A

N/A

N/A

Mississippi

N/A

N/A

N/A

N/A

N/A

N/A

Missouri $66.1

N/A

N/A

N/A

N/A

1.2%
Montana $33.1

N/A

N/A

N/A

N/A

16.3%
N. Mariana Islands $1.7

N/A

N/A

N/A

N/A

N/A

Nebraska $37.3

N/A

N/A

N/A

N/A

6.4%
Nevada $40.0

N/A

N/A

N/A

N/A

2.5%
New Hampshire $42.1

N/A

N/A

N/A

N/A

0.2%
New Jersey $204.3 76% $3,622.2 $186.0 $1,280.9 0.0%
New Mexico $21.1

N/A

N/A

N/A

N/A

27.9%
New York * $828.8 100% $2,184.9

N/A

N/A

4.7%
North Carolina $139.5

N/A

N/A

N/A

N/A

0.9%
North Dakota $34.0

N/A

N/A

N/A

N/A

27.9%
Ohio $331.1 100% $5,531.6 $319.5 $6,624.3 0.5%
Oklahoma $77.2

N/A

N/A

N/A

N/A

29.4%
Oregon $86.9

N/A

N/A

N/A

N/A

11.4%
Pennsylvania $233.3

N/A

N/A

N/A

N/A

2.1%
Puerto Rico $71.9 100% $1,475.3 $304.1 $11,124.6

N/A

Rhode Island $51.8 100% $882.4 $197.0 $2,834.2 0.8%
South Carolina $90.5

N/A

N/A

N/A

N/A

5.5%
South Dakota $26.6 100% $169.6

N/A

N/A

15.0%
Tennessee $137.4

N/A

N/A

N/A

N/A

3.6%
Texas

N/A

N/A

N/A

N/A

N/A

N/A

U.S. Virgin Islands $2.2 100% $29.0 $7.3 $48.2

N/A

Utah $39.4

N/A

N/A

N/A

N/A

19.0%
Vermont $37.3

N/A

N/A

N/A

N/A

10.5%
Virginia $115.9 50% $1,149.3 $104.2 $989.6 8.2%
Washington $164.8 29% $334.7

N/A

N/A

0.5%
West Virginia $63.4 100% $911.1 $65.3 $1,814.3 8.4%
Wisconsin $145.7

N/A

N/A

N/A

N/A

3.6%
Wyoming $17.0

N/A

N/A

N/A

N/A

30.0%

Sources: National Association of Attorneys General, Thomson Reuters, Campaign for Tobacco Free Kids, Municipal Securities Rulemaking Board and Richard Larkin, analyst at Herbert J. Sims & Co.

* California and New York split their proceeds with cities and counties, who did their own tobacco deals. Those deals are excluded from the above totals.
** Capital appreciation bond data comprises turbo capital appreciation bonds, excluding serial and convertible issues